BLACKSTONE MORTGAGE TRUST, INC. Q2 FY2024 earnings call

Strategic Positioning

• Strategically positioned to navigate credit cycle, with stabilization of rates and capital markets in 2024.
• 90% performing portfolio at quarter end, with much of the portfolio well-positioned for refinancing.

Portfolio Resolutions

• Collected $1.7 billion of repayments through first half of 2024. Over $700 million of office repayments year to date, with repayment momentum accelerating in July.
• Closed on three major loans in London and West LA with significant borrower equity commitments. Nine upgrades this quarter, mostly hospitality, industrial, and multifamily loans.
• Resolved an $84 million Brooklyn office loan above carrying value. Resolved five non-performing assets in first half, on track for more in coming quarters.

Partnerships

• Announced partnership with M&T Realty Capital to provide borrowers access to multifamily agency loan execution, complementing bridge multifamily lending business.

Balance Sheet

• Maintained best-in-class liability structure with term match financing and zero capital markets mark-to-market provisions. Debt to equity was 3.9x at quarter end. Substantial liquidity of $1.6 billion at June 30, about 40% of book equity.

In the second quarter, Blackstone Mortgage Trust (BXMT) reported a GAAP net loss of $0.38 per share. Distributable earnings were $0.49 per share, and distributable earnings prior to charge-offs were $0.56 per share. The portfolio was 90% performing at quarter end. Specific reserves represented 29% of impaired office assets, implying asset values down more than 50% from origination. Multifamily and industrial loans were 99% performing. The company paid a second quarter dividend of $0.62 per share and declared a third quarter dividend of $0.47 per share, with a $150 million common stock repurchase authorized.

Dividend and Repurchase

• Declared a third quarter dividend of $0.47 per share. Authorized a $150 million common stock repurchase.

Second Half Outlook

• Expect second half of 2024 to be more active on investment front, with continued capital allocation and focus on redeploying capital accretively.看好市场愈合趋势，通胀放缓，企业债务和CMBS发行增加，房地产领域新供应大幅下降，为长期基本面表现提供有力催化剂。

Credit Issues

• Credit issues concentrated in U.S. office, with specific reserves representing 29% of impaired office assets, implying asset values down more than 50% from origination.

Market Volatility

• Volatility in capital markets and potential for further credit migration remain risks, although the company is positioned to navigate the cycle.

Q: Steven Delaney asked about net basis shrinkage of the portfolio and BXMT's optionality with the M&T Realty partnership.

A: Katie Keenan said the portfolio shrinkage depends on capital allocation for accretive redeployment, and the partnership with M&T is a complementary model for BXMT without immediate option to acquire the entire business.

Q: Stephen Laws inquired about the new dividend level and reserve expectations.

A: Katie Keenan stated the dividend is based on sustainable long-term earnings, and reserves are concentrated in U.S. office with positive trends in other asset classes. Tony Marone mentioned earnings encumbered by interest expense from non-performing loans but progress on resolutions.

Q: Douglas Harter asked about liquidity and credit migration.

A: Katie Keenan said liquidity is better served by investing now, with expectation of not maintaining record levels, and considering credit migration scenarios.

Q: Jade Rahmani asked about securitization markets and new investments.

A: Katie Keenan said securitization markets are relevant, and the company is strategic about accessing risk-return tranches, with potential for loan portfolio sales from banks.

Q: Donald Fandetti asked about Fed cuts and market response.

A: Katie Keenan said Fed cuts could drive liquidity and refinancing, but office challenges are more secular than rate-related.

Q: Richard Shane inquired about the $150 million repurchase authorization.

A: Katie Keenan said it's about balancing dividend and capital allocation for best long-term earnings power, with dynamic decision-making on investments and buybacks.

Q: Eric Dray asked about Fed cuts and office stabilization.

A: Katie Keenan said lower rates help marginally, but office challenges are about demand reset and transparency, not solely rate-driven.